QBE playing catch-up after aggressive expansion

QBE
boss
John Neal
, who took over the reins of the global insurer from veteran
Frank O’Halloran
in August, inherited a business that for years aggressively expanded through acquisitions.

Billions were spent on snapping up insurance companies, but not much was done to consolidate parts of the business or reduce staffing costs.

While planning to axe around 700 people might appear to be a big hit on the group’s local operations, job cuts are arguably one of the most effective ways to reduce the insurer’s operating expenses.

It is well known that QBE’s Australian rivals, including
Insurance Australia Group
and
Suncorp Group
, have been scaling back employee numbers in the past few years. QBE, by comparison, is playing catch-up.

The added blows of claims from natural catastrophes – including losses from superstorm Sandy and severe disasters in 2011 – will put further pressure on QBE to target savings and improve its bottom line.

The global insurer has flagged that it is aiming for $US200 million in annual operating cost savings by 2014.

Neal is expected to update shareholders on the group’s cost-saving measures during its full-year profit results presentation next month, although some analysts say QBE will avoid discussing job cuts.

Neal will not be the last chief executive looking to slash costs this year. Slow economic growth, subdued investor sentiment and tough business conditions will probably lead to many CEOs following in his footsteps.